Unboxing 51% attack
Every Proof of Work based Blockchain can be susceptible to what is known as a 51% attack. There are some misunderstandings as to what can be done with such an attack. Before explaining what it is exactly, let's first understand mining in PoW.
The decentralization of a blockchain ecosystem comes with its own set of challenges. One of them is how to make every network participant agree on the current state of the Blockchain? The majority of nodes need to reach a consensus in regards to the process of mining regularly. Mining is the mechanism to secure and decentralize the Blockchain. Miners validate new transactions and record them on to the Blockchain. In the Proof of Work system, miners compete to solve a very complex mathematical puzzle. The one who solves it first can add a new block into the Blockchain, thus also receiving a reward for the computation work he has done (Proof of Work).
Since the process of mining involves the massive investment of electricity and computational resources, a miner's ability to mine is referred to as hash rate or hash power. Many different mining pools have different hash rates. Mining nodes are distributed worldwide, and every node competes with others in the mining competition to solve the puzzle. This means the hash rate is distributed, not entirely evenly, but no single entity has the power to have over 50% of the hash rate.
But what would happen if some would have 51% of the global hash rate of PoW based Blockchain system?
Majority attack
A 51% attack is a potential attack on a blockchain network, where a single entity or organization can control the majority of the hash rate, potentially causing network disruption. Such an attack can do several things to the network. They could stop anyone from using the chain. An attacker could block any transaction they disagree with, causing censorship. They could also undo a certain number of blocks and change the order of transactions in them, forcing their own longest chain to win and be accepted as a new truth.
On the other hand, a 51% attack would not allow the attacker to change the system's rules. They couldn't simply bring new coins by changing the block's reward or steal coins that never belonged to the attacker. Also, they wouldn't be able to reverse transactions from other users or prevent a transaction from being created in the first place and broadcasted to the network. They could not include them but not stop them from creation in the first place.
It is important to understand how 51% attack works and what damage it can do. But I often saw it described incorrectly, adding characteristics that aren't possible, like printing new coins out of thin air.
There are two good resources to dive deeper into the subject.
Binance Academy
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